2023 (8) TMI 131 - AT - Companies Law

NCLT approves settlement under Companies Act 2013, dismissal of appeal for fair Debt Due calculation

The NCLT had jurisdiction to approve the settlement between parties under the Companies Act, 2013. The calculation of the 'Debt Due' and 'Full and Final ... Oppression and Mismanagement - foreclosure of the Concession Agreement regarding construction of Kiratpur – Ner Chowk section of National Highway - Approval of proposed settlement between the National Highways Authority of India (NHAI) and Kiratpur Ner Chowk Expressway Limited (KNCEL) - power of NCLT to approve the “Settlement Agreement’ between KNCEL and NHAI - senior creditors were required to be heard before according such approval or not - calculation of “Debt Due” and the “Full and Final Settlement amount” has been done correctly or not - any estoppel would operate in view of the fact that the creditors/Appellants had accepted the distributed share of the settlement amount or not. Whether the settlement agreement between KNCEL and NHAI is in accordance with the proposed Resolution Framework for IL&FS and its group companies? - HELD THAT:- It is noted that the procedure suggested by Union of India through its Affidavit dated 17.2.2020, which has been approved by NCLT and NCLAT dated 17.2.2020, gives various options for final resolution. These options include modalities for Group Level Resolution, Vertical Level Resolution and Asset Level Resolution. The Resolution Framework considers Asset Level Resolution as the most feasible option and includes sale of entity as Asset Level Resolution. This sale of entity can take place wherever feasible. The Resolution Framework also stipulates that Asset Level Resolution is to be undertaken in a fair and transparent manner to determine the best possible price to effect a change in the ownership and the relevant company in accordance with process supervised by the New Board and approved under section 242 of the Companies Act. In the present case, it is seen that the resolution of KNCEL is proposed under the Guidelines of MoRTH for resolution of “stuck projects”. These Guidelines provide for settlement between the Concessionaire KNCEL and Concessioning Party NHAI and execution of a Supplementary Settlement Agreement to finalise and concretise the settlement between the two parties. Further, the settlement between the parties is worked out under the guidance of the Conciliation Committee of Independent Experts-II, which comprises of a Retired Hon’ble Judge of High Court and two Learned Technical Experts as conciliators. Admittedly, the Concessionaire and Concessioning Party had signed the original Concession Agreement. Therefore, in our view they are the necessary parties to enter into a settlement agreement. We have noted earlier in this judgment that the settlement agreement has been worked out under the supervision of CCIE-II, which in para 2.1 notes the gross settlement amount of Rs.708.40 crores and the net due amount, after taking into account Rs.35.78 crores towards recoveries, is Rs. 672.42 crores - the Settlement between KNCEL and NHAI was in consonance with the provisions of the Resolution Framework for IL&FS and its group entities and approved by NCLAT, which was further approved by CCIE-II and Hon’ble Shri Justice D.K. Jain. Whether the Termination Payment in accordance with Article 37.3.1 of the Concession Agreement as claimed by the Appellant will be applicable in the present case? - HELD THAT:- The procedure set out in the MoRTH Guidelines stipulates that Concession Agreement may be foreclosed vide a Supplementary Agreement, mutually agreed and executed between the parties. Annexure I of these guidelines refers to 90% of ‘Debt Due” amount, which is calculated in accordance with the formula which is discussed and then accepted by both the parties. Since the two original parties in the Concession Agreement were entering into a Supplementary Settlement Agreement, there does not appear to be any requirement to consult all stakeholders including financial creditors at the stage when the two parties to the Concession Agreement are settling their dispute. The amount of “Debt Due” which has been calculated by the Appellants based on the claims admitted by the Claim Management Consultant cannot be the amount of settlement. In the present case, a settlement has been entered into between KNCEL and NHAI and a Supplementary Agreement was signed non mutually agreed terms between the two parties. Therefore, any reference to the clauses of the Concession Agreement for calculation of ‘Termination Payment’ is not justified and the full and final settlement amount in the present case is as per the settlement agreement. The settlement entered into by KNCEL and NHAI for foreclosure of the Concession Agreement relating to Kiratpur - Ner Chowk Project under the MoRTH Guidelines is in accordance with the approved Resolution Framework in relation to the ILF&S and its group entities which are correctly approved by the NCLT by the Impugned Order. The Appeal is, therefore, devoid of merit and is accordingly dismissed. Issues Involved:1. Jurisdiction and approval of the 'Settlement Agreement' by NCLT.2. Correctness of the calculation of 'Debt Due' and 'Full and Final Settlement amount' and the applicability of estoppel.Summary of Judgment:Issue 1: Jurisdiction and Approval of the 'Settlement Agreement' by NCLTThe Appellants argued that the NCLT's approval of the settlement between KNCEL and NHAI was beyond its jurisdiction and done without hearing the senior creditors. The NCLT, however, has broader powers under sections 241-242 of the Companies Act, 2013, which allow it to pass orders for resolution akin to a moratorium under section 14 of the IBC. The NCLT's order was in line with the Resolution Framework for IL&FS and its group companies, approved by NCLAT and further validated by CCIE-II and Hon'ble Justice D.K. Jain. The settlement was reached under the MoRTH Guidelines, which provide for a mutually agreed Supplementary Settlement Agreement between the Concessionaire and the Concessioning Party.Issue 2: Calculation of 'Debt Due' and 'Full and Final Settlement Amount'The Appellants contended that the 'Debt Due' should be calculated as per the Concession Agreement, which they claimed amounted to Rs.1025.56 crores. However, the settlement amount of Rs.672.62 crores was calculated based on the MoRTH Guidelines, which stipulate the lower of the value of work done or 90% of the debt due. The calculation was approved by CCIE-II and Hon'ble Justice D.K. Jain, taking into account the interests of all stakeholders. The NCLT found the settlement fair, transparent, and reasonable. The Appellants' acceptance of the distributed settlement amount invoked the principle of estoppel, preventing them from contesting the settlement post-acceptance.Conclusion:The NCLT was within its jurisdiction to approve the settlement, and the calculation of the 'Debt Due' and 'Full and Final Settlement amount' was correctly done as per the MoRTH Guidelines and the approved Resolution Framework. The appeal was dismissed as devoid of merit.